Should the Commission be paying federal taxes on its dues and fees? Should the Commission be withholding payroll taxes? Is the Commission entitled to a operate a governmental pension plan? Does the Commission owe social security and medicare taxes? Considering that the Commission hasn't addressed it's own tax position in 40 years (see the footnotes to their financials) and Gillette and other Supreme Court decisions are major events interpreting its powers, it would seem that the Commissioners of Revenue that make up the executives of the Commission owe the public a transparent and thorough justification of their claim of tax exemption. Further since the Commission is not a state or political subdivision, shouldn't it be filing it's own tax return under Rev. Rul. 78-316, 1978-2 C.B. 304. The Commission has never indicated that it files tax returns.
For purposes of disclosure under IRC section 6103, the
IRS has never considered the Commission a state or given it
direct access to federal tax information. Announcement
2011-78, 2011-51 IRB 874, which provides guidance as to
whether an entity is eligible for an IRC section 457 deferred
compensation plan, defines key terms for IRC section 457,
including ‘‘state,’’ ‘‘political subdivision of a state,’’ and
‘‘agency or instrumentality of a state or political subdivision
of a state.’’ Under the announcement, state means any
state of the United States and the District of Columbia.
Thus, while the Commission is not a state or a political
subdivision of a state,might it be considered an agency or
instrumentality of a state? The determination is a facts and
circumstances test. There are five key factors and, on examination,
the Commission appears to meet only the first. The
five factors in Announcement 2011-78 are:
• the entity’s governing board or body is controlled by a
state or political subdivision;
• the members of the governing board or body are
publicly nominated and elected;
• the entity’s employees are treated in the same manner
as employees of the state (or political subdivision
thereof ) for purposes other than providing employee
benefits (for example, the entity’s employees are
granted civil service protection);59
• a state (or political subdivision thereof ) has fiscal
responsibility for the general debts and other liabilities
of the entity (including funding responsibility for the
employee benefits under the entity’s plans);60 and
• an entity that is not a political subdivision is delegated,
under a statute of a state or political subdivision, the
authority to exercise sovereign powers of the state or
political subdivision (such as the power of taxation, the
power of eminent domain, and the police power).61
As a third-party contract auditor with no power to assess
tax, what differentiates the Commission from other contract
auditors? If the Commission’s actions are advisory under
Article VII, how does that make the Commission an intergovernmental
agency? How can it be both an agent and an
intergovernmental agency at the same time?
The Commissions tax footnote has not changed in 40 years -
Is it time for the Commission to reconsider it own tax status after Gillette and the other cases.
FY76-77 Notes to Financial Statements:
NOTE 2 - INCOME TAXES
In the opinion of legal counsel, the Commission is exempt from Federal income tax as well as from other Federal taxes as an organization of a group of States or as an instrumentality of those States. Therefore, no provision has been made in the financial statements for Federal income taxes.
FY75-76 Notes to Financial Statements:
Note 4:
In the opinion of legal counsel, the Commission is immune from Federal income tax as well as from other Federal taxes as an organization of a group of States or as an instrumentality of those States. Therefore, no provision has been made in the financial statements for Federal income taxes.
The Internal Revenue Service has denied the Commission exempt status under the provisions of Internal Revenue Code Section 501(c)(6).